Obtaining an EB-5 visa is one of the most popular ways for foreign nationals to gain permanent resident status and relocate to the United States. This is unsurprising in light of the many benefits of participating in the EB-5 investment program, which allows foreign nationals to invest in a wide variety of U.S.-based new commercial enterprises (NCEs) using virtually any legal source of funds. The EB-5 investment industry is full of reliable, lucrative projects in sectors such as hospitality, tourism, and commercial real estate development. Additionally, the controversial EB-5 Modernization Rule was overturned on June 22, 2021. As of that date, foreign nationals can make an EB5 investment at $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects. These minimum investment requirements are significantly lower than the previous amounts of $900,000 for TEA projects and $1,800,000 for non-TEA projects.
The investors themselves are not the only ones who benefit from participating in the EB-5 program—their spouses and children are also eligible to receive green cards. What is more, the investor and their family will even be able to apply for U.S. citizenship after holding permanent resident status for five years.
Perhaps the most important decision foreign nationals can make regarding their EB5 investment is to choose between a direct investment or a regional center project. (Even though the regional center program expired on June 30, 2021, investors can be confident that it will be resumed in the near future.) There are many key differences between these two EB5 investment types, including how the investments are made and the investor’s level of involvement in the project. Foreign nationals planning an EB-5 investment would do well to carefully compare regional center and direct investments to decide which one suits their investment goals and availability.
Basic Characteristics of Regional Center EB-5 Investments
Regional centers are agencies approved by United States Citizenship and Immigration Services (USCIS) that promote employment and economic growth. When a foreign national invests in a regional center project, they do so through the intermediation of a regional center, which has set up an investment fund. For these kinds of projects, the NCE and the job-creating entity (JCE) are typically separate.
The main reason regional center investments were so popular before the June 2021 expiration of the program was their flexible job creation criteria. In addition to direct employment (jobs that appear on the NCE’s payroll), regional center projects can count indirect and induced jobs. Indirect employment is generated by the EB-5 business’s purchases of products and services from local companies, and induced jobs are a result of the employees’ spending in the project’s area. As a result of these more relaxed employment creation criteria, it is typically easier for regional center EB-5 investments to create the 10 positions required by USCIS.
Basic Characteristics of Direct EB-5 Investments
Unlike regional center investments, direct EB-5 capital must be invested directly into the NCE. Moreover, the NCE and the JCE must be the same entity, and only directly created jobs can be counted toward fulfilling the employment criteria. Direct projects must hire employees and have them on their payroll. These jobs must last for a minimum of two years, but multiple employees can fill the position during that period—USCIS will focus mainly on the duration and nature of the position, not on how many employees filled it during the two-year period. Due to the absence of indirect or induced employment, direct EB-5 projects will usually have to make a greater effort to create the required number of jobs.
Direct and regional center projects also require different levels of involvement from their investors. Most regional center projects allow investors to become limited partners. Even though they must contribute to important management and policy matters, they may not have to oversee the business’s day-to-day activities. In contrast, direct investors are usually more involved in the project’s operations and have more control over how their EB-5 investment is spent. As a result, many foreign nationals who make a direct EB-5 investment want to gain significant profits as well as permanent resident status.
The complex regulations governing the EB-5 investment program can certainly be overwhelming at first, and investors must weigh numerous factors when choosing between direct and regional center investments—each investment type has its own benefits and drawbacks. Foreign nationals who are planning an EB-5 investment should consult with an immigration attorney and EB-5 experts to decide which investment type will be most advantageous.